After a strong first half, loan growth could lose momentum.
If the slowdown in the economy is hurting sales of new trucks, it’s also beginning to impact the financing of used trucks. And firms like Shriram Transport— which operates in the niche business of lending to fleet operators who buy second-hand trucks—are beginning to feel the pinch.
Managing Director R Sridhar confirms that his company is lending less these days. From around Rs 1,000 crore – Rs 1,200 crore per month six months back, the run rate for loans has now dropped to Rs 700 crore a month, a fall of over 40 per cent.
Fleet operators are in no hurry to buy trucks—old or new—-because the quantum of goods being transported has reduced over the last few months.
While there’s enough agricultural produce to be moved, it’s not the same for industrial goods. Moreover, operators now have to pay more for the money they’re borrowing from financiers whose costs have gone up. Sridhar says his firm now pays 250 basis points more than it did six months back and that interest rates are now close to 13 per cent. What’s more, he concedes that non-performing assets have risen slightly and given the scarcity of credit, the firm is going slow on new loans.
Shriram Transport has a market share of 20 per cent in the used trucks segment and while its share may remain intact, the firm’s loan book, which was estimated to grow by about 27 per cent in 2008-09, may now increase by a more subdued 18-20 per cent.
The growth in the first half of the year was 37 per cent. This means the Rs 2,438 crore firm will clock a slower growth in its revenues after posting a rise of 65 per cent to Rs 1,710 crore in the first half of 2008-09. The growth in the net profit too was a strong 85 per cent at Rs 309 crore in the six months to September, but the rise may not be as impressive in the rest of the year.